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INTRODUCTION
The OTC Digest is proud to introduce our members to Ultralife Batteries (NASDAQ: ULBI). As the demand for power in a host of new devices creates unprecedented demand, ULBI is working diligently to develop batteries capable of charging faster.
The company provides unique high-energy power solutions, communications systems, and technical services. The stock has performed very well over the past few months (See Six month chart) and it is holding up nicely in what could best be described as a weak market. Few stocks can make this claim.
When ULBI first went into business in 1990, all they sold were 9V radio batteries for $3. Over the years, ULBI has expanded their business and product offerings dramatically. The Company calls their growth and product expansion “moving up the value chain.” In late 2007, ULBI won two huge contracts totaling over $100M, and new business prospects appear better than at any time in the Company’s history.
Today, ULBI sells complete communications systems including “sat-com on the move.” These mobile satellite telecom systems require more energy to communicate longer over greater distances. Since their $3 battery days in the early ‘90’’s, the Company now sells complete telecom backup systems that sell for over $1M.
Year-end 2007 earnings will be released on February 14, 2008. Shares of ULBI could continue to consolidate as the market correction continues. With profit margins ramping to 30%, we would not be surprised to see shares back over their old high over the next few quarters.
Aggressive growth investors would be well advised to continue their due diligence on this high growth company for consideration as part of a well-diversified stock portfolio.
TECHNICAL REVIEW
While the Russell 2000 index has endured a tough correction since early November, shares of ULBI broke out of a cup and handle formation in mid December. Part of the driving force behind this breakout is the fact that ULBI’s operating margins are improving, and sales and earnings are expected to jump dramatically this year. In fact, 2008 revenue is projected to grow to $230M, double the amount of revenues in 2006.
Since hitting an annual closing high of $23.69 on January 10, shares of ULBI have fallen back to the $18 range, a healthy 20% pullback. At current prices, shares are trading at only 13X anticipated earnings for the current fiscal year ending December 2008. We would not be surprised to see ULBI’s P/E multiple expand as this year’s revenue projections are achieved.
FUNDAMENTAL OUTLOOK
The Company's founders were among the original pioneers of the lithium battery industry and have sought to develop and commercialize new, more advanced power technologies.
A partial list of ULBI customers includes General Dynamics, Philips Medical Systems, General Motors, Energizer, Kidde Safety, Lowe's, Radio Shack and the national defense agencies of the United States, United Kingdom, Germany, Australia and New Zealand.
No other power solutions manufacturer produces and markets primary (9-Volt, HiRate® Cylindrical and Thin Cell®) lithium batteries, lithium ion and lithium polymer rechargeable batteries as well as chargers and communications accessories.
The Company reported revenue of $33.3 million for its third quarter of 2007, an increase of 40% compared with $23.7 million reported in the same three-month period in 2006. Operating income was $0.2 million compared with a $2.1 million operating loss a year ago.
For the nine-month period ended 9/29/07, revenue was $100.8 million, an increase of 59% when compared with revenue of $63.4 million for the same period a year ago. Net income for the first nine months of 2007 was $1.1 million, or $0.07 per share, compared to a net loss of $1.4 million, or $0.10 per share, for the same period last year.
Management projects revenue of approximately $41 million to $44 million for its fourth quarter ending 12/31/07, with 2007-year end numbers to be reported on or around February 14, 2008.
THE BIG PICTURE
From 2003-2007, ULBI has generated revenues between roughly $80M to just over $100M, with last year expected to be their best year yet. However, as good as 2007 was, 2008 will be even better. Through prudent acquisitions, the Company has slowly increased spending away from defense markets in an effort to capitalize on explosive demand from commercial markets.
ULBI has continued to leverage their expertise in engineering to offer higher value services at a time when they are simultaneously exploiting and extending the global reach of their products. With recent contract approvals, ULBI’s revenues are projected to hit $230M this year, a 64% projected increase.
The best part about the anticipated spike in revenues this year, comes from the fact that ULBI’s profit margins have also improved nicely over the past several quarters. Combining dynamic revenue growth with increased profit margins is not a story many companies are prepared to tell in 2008, but one the OTC Digest is glad to share.
Company Information:
Web Site:http://www.ulbi.com
Stock Quote: Nasdaq: ULBI
Investor Relations:
Lippert/Heilshorn & Associates, Inc.
Jody Burfening
Phone: 212-838-3777